S&P 500 – Is It Time To Get In?
- John Nwatu MSTA CFTe
- Oct 8
- 2 min read
📊 Theme: Strong price action, but short-term signals suggest caution
🧭 Trend Status: Bullish
📉 Signals to Watch: Divergence + falling open interest = possible stall
🧠 Wave Structure: 5th wave of the 3rd leg approaching completion
Market Snapshot: Price is Rising, But Participation Weak
The S&P 500 continues to show clear bullish strength, with price action holding firmly above both the 60-day and 250-day EMAs. From a trend-following perspective, this is a classic signal of continuation.
However, there are now multiple caution flags forming beneath the surface — subtle signs that this trend could be pausing or correcting in the near-term.
Technical Signals That Suggest a Pause or Correction
📉 RSI and MACD Divergence: Momentum is decelerating while price continues higher — a common sign of trend exhaustion
🛑 Open Interest Falling: According to the CFTC report (week ending 23rd September), open interest declined by over 500,000 contracts
🤔 Price Rising While Participation Falls: This kind of divergence often precedes a pullback, as it shows traders are exiting while price climbs
Sentiment Insight: Shorts Getting Squeezed?
What stood out from the CFTC data was the high number of non-commercial short positions.
While some of this may reflect skepticism around valuation levels, it appears those shorts are being gradually squeezed, fueling the current rally — but without genuine buying volume to support it.
In these situations, I always go back to the basics: follow the price, not the bias.
The current move up feels more like a mechanical squeeze than a conviction-led trend. That doesn’t invalidate the bullish structure, but it does raise the risk of a sharp, unexpected unwind.
Elliott Wave View: 5th Wave of the 3rd In Play
From a wave count perspective, we appear to be in the 5th wave of the 3rd impulsive structure. That suggests:
✅ Upside could still continue in the short term
⚠️ But once complete, a Wave 4 correction may unfold before any continuation
📍 Key Level to Watch: 5,481
If price enters this territory (previous Wave 1 zone), it invalidates the current count and would require a full reassessment
Positioning View
If you’re already long:
Consider holding or taking partial profits
Monitor signs of rollover or stalling momentum
Watch open interest trends and RSI/MACD closely
If you’re not yet in:
Now may not be the best time to enter fresh long positions
Wait for structure to reset or a clean breakout backed by volume and participation
Final Word
The S&P 500 remains bullish — but not invincible. When price is rising and participation is falling, it’s often a sign that momentum is running on fumes.
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